The demand side of business travel and tourism

Given the complexity of business travel and tourism, any attempt to seek to measure its volume is almost certainly doomed to failure. Data is collected on different bases in different countries and it can be a considerable time between the collection of data and its publication. Furthermore, much data is collected for commercial purposes and is never published.

There is also considerably more data available on conferences and meetings than on incentive travel or exhibitions, for example. This information has a bias towards conferences and meetings, although it does endeavour to consider all types of business travel and tourism.

However, before we begin to look at the demand for business travel and tourism, in statistical terms, we need to say a few words about the nature of demand, in this field, in general.

First, we need to recognize that demand in business travel and tourism has two dimensions, namely, the customer and the consumer.

Customers and consumers

A major difference between business travel and leisure travel is the fact that in the former, there is often a clear distinction between the customer and the consumer.

Customer

• Employers or sponsoring organizations who make decisions that employees will travel, or give permission for employees to travel

• Employers or sponsoring organizations who usually pay the bill for the travel undertaken by employees or representatives

Consumer

• Employees who actually travel and consume business travel and tourism services

• Employees and representatives who travel but do not usually pay the bills themselves

While this is clearly a gross simplification of the situation it is still valid and helps explain one of the key perceived characteristics of the business travel and tourism market, namely the idea that business travel is less price elastic than leisure travel because, often, the business traveller him or herself is not paying the bill. However, this generalization does not apply to the self-employed, who constitute a significant proportion of the business travel and tourism market.

At the same time the customer and consumer can often be one and the same person or body. For example, the scientific committee of an international association conference will be both customer and consumer. They decide on the conference venue, pay to attend the event, and then attend and consume a range of travel and tourism services in so doing.

Motivators

The motivators for business travel will be different for the customers and consumers and perhaps in relation to different types of business travel. Let us look at some hypothetical examples to illustrate this point.

The managing director of a UK-based food company books a stand for the company at a trade fair in France. He wants to raise the profile of the company and increase sales in France, as cheaply as possible. He selects Mr 'A' to represent the company at this event because he speaks good French. Mr 'A also has a taste for French food and wine and sees this as an ideal opportunity to indulge in both at the company's expense. He also sees it as an ideal opportunity to make contact with French companies to help him get a job in France. He spends lots of money but devotes little time to selling his own company's products.

Playtime Inc., a young computer games company decides to take staff on an incentive travel trip to help with team-building and to encourage staff to work harder in the future. The company does not explain this to the staff, who therefore think the trip is a reward for past efforts which, to be honest, have not been that great. The staff see this trip as a 'freebie', a perk, some fun at the company's expense. Not surprisingly, the trip is not a great success.

The head of the Philosophy School at Newton University gives permission for Dr Socrates to attend the International Symposium on German philosophers and their work, in Acapulco. This conference is part of Dr Socrates' staff development and is designed to help her keep up to date with developments in her field. It is also intended to give her an opportunity to network and raise the profile of the university's new MA in the Philosophical Aspects of Mobile Phone Use. Dr Socrates has other ideas, however, and prefers to spend most of the conference discussing the philosophy of coastal tourism, on the beach, with an attractive male philosopher from the University of Nether Hampton!

All three scenarios illustrate the potential for a gap in the motivators of customers and consumers in the different areas of business travel and tourism.

The structure of demand

Business travel and tourism demand has a number of dimensions. Clearly, in its simplest sense it is the number of people travelling for business purposes in a particular region, country or worldwide.

However, this total demand can be subdivided in a number of ways:

• Frequency of travel

• The level of demand for particular destinations

• The level of demand for particular venues

• Expenditure during the trip

• The duration of the trip

• The purpose of the trip and the type of business tourism

• The level of demand for different types of accommodation

• The level of demand for the products and services of particular suppliers and intermediaries

• The seasonality of demand

• The segmentation of the market on the basis on type of employer, age, sex, race and nationality (for example)

The factors which influence business travel and tourism demand

Business travel and tourism demand is influenced by a broad range of factors found in both the generating region and the destination. The factors outlined bellow tend to focus on the forces that will influence demand between a specific generating region and a particular destination. It also gives an indication of the factors that will influence demand overall in any particular generating region.

However, this is a highly generalized picture and specific factors will influence the demand for particular forms of business tourism such as incentive travel and training courses. Let us now look at how the market can be subdivided and segmented.

Factors influencing demand in the generating region and the destination

Generating region		Destination
Level of economic development and state of the economy	A high level of economic development and a strong economy increases demand and vice versa	Level of economic development and state of the economy
Currency exchange rates	High relative exchange rates for the generating region against destination makes travel cheaper and stimulates imports while reducing exports to the destination, and vice versa	Currency exchange rates
Degree of political stability	Political stability is required in both the generating region and the destination for business travel to flourish	Degree of political stability
Cost of living	A lower cost of living in the destination zone may well increase the attractiveness of the destination for conferences for people from the generating region	Cost of living
Historical and/or cultural links with particular places	The stronger these links the higher the level of business tourism might be expected	Historical and/or cultural links with particular places
The industrial structure	Business travel is likely to be greater between generating regions and destinations which have shared interests in particular industries, products and services	The industrial structure
Government policies on trade relations	The more both governments support the policy of free trade, the greater the likely level of business travel and tourism between the two	Government policies on trade relations

Segmentation

It is possible to segment the business travel market in many ways:

• Seasonality of business trip

• Short-haul vs long-haul travellers

• Those who book via agents and those who book directly

• Purpose of trip, e.g.Individual business trip, conference, incentive travel, etc.

• Nationality of business traveler

• Gender of business traveler

• Frequent vs less frequent travellers

• International vs domestic business travel

• Mod of transport used by the business traveler

• Age of the business traveller

The growing segments in the market appear to be:

• business travellers from newly industrialized countries such as South Korea or Taiwan

• business travellers from Eastern Europe where political change has led to growth of business tourism

• female business travellers

• people taking incentive travel packages

• frequent travellers

• long-haul business travellers.

The situation is constantly changing and the ways of segmenting the business travel market are likely to change, too, over time.

There are three other issues we would like to consider at this stage:

• the nature of demand for different types of business travel and tourism

• the levels of business travel and tourism and different industries

• the question of seasonality of demand.